Friday, December 27, 2013

Let's Protect Canadian Cheese !!

I've been going through some old stuff that I've saved for a few months and came across this gem of an essay that run in Industry Week a while back. The United States sugar industry has been protected (for various, ever-changing reasons) since the James Madison administration in 1816. Remember that when you get to the part about artisan Canadian cheese-makers ! This is good stuff. From an economist named Brian Beaulieau.

Canada and the European Union are on track to ratify a free-trade deal in 2015. Leaders in both countries expect the deal to be approved without a lot of resistance. The deal, called CETA, would eliminate tariffs on goods and provide for greater access of services both ways across the Atlantic. Some regulatory dismantling would also occur. Free trade with less regulation in Canada and the EU – that's great news if you are a cheerleader for the free market.

The estimate is that this deal would increase the current EU-Canada trade volume of €80 billion (aprox $109 billion) a year by 23%. Consummation of CETA would also mean that Canada is the only Group of Eight nation to have preferential access to the US and Europe, the two biggest consumer markets in theworld.

The European Commission estimates that up to a quarter of the economic benefits will come from eliminating regulatory barriers to trade. Reducing barriers sounds like a terrible idea to protectionists or to uncompetitive industries, but it fosters competition, efficiencies, and in the end, results in economic gains for consumers.

There's an old joke that I love that goes "If you don't go to other peoples' funerals, they won't go to yours." But seriously..... If your citizens aren't allowed to buy other countries' goods and services, those countries aren't going to buy yours. Protectionists just don't get it.

There are those who would prefer that the protective barriers would continue. Canada's cheese industry is one such group. They state that Canada will lose its small, artisan local cheese makers as Europe's name-brand makers have easy access to their market. This is exactly the protectionist versus free market point. These small Canada cheese makers are not seeing the potential of access to a huge market; they fear that superior goods will take away market share.

The free market answer is to improve your quality and marketing and compete on a larger stage. If the local cheese makers truly produce an inferior product, why should they be protected from those who are better at their trade? The reality is most will probably improve their process, product and positioning, and in doing so be better entities because of this. That's the beauty of the free-market system; it pushes participants to new heights.

Go here to read about the Florida's Fanjul family and their (protected) sugar empire. God has more competition than they do.